IPO listed on 4 Nov'24
Afcons Infrastructure Ltd
Minimum Investment
₹ 14,816 / 32 shares
Grey market premium
₹ 33 (7% premium)
Issue price
₹ 463
Listing price
₹ 426
Listing gains
-37 (-8%)
Listing on
Nov 4, 2024
Our Verdict:
Neutral
- Afcons Infrastructure Ltd (Afcons) has demonstrated sustained growth in both revenue and profits over recent years. With a strong parentage and over 60 years of experience, Afcons has a proven track record in successfully managing large, complex projects.
- Further, the recent fundraising of Rs 1,250 crore is expected to bolster project execution capabilities through debt repayment and investments in working capital.
- Regarding its IPO valuation, Afcons is priced at a price-to-earnings (P/E) ratio of 36x based on FY24 earnings, similar to L&T’s valuation—a significantly larger and more diverse entity. But unlike L&T, which operates in various sectors, Afcons is distinct as one of the few publicly listed pure EPC players.
- With the IPO appearing fully priced, substantial listing gains are unlikely. Additionally, the substantial debt and pledge of promoter shares (explained below) raise concerns. It would be prudent for long-term investors to keep this stock on their radar and buy after listing, once its share price stabilizes.
About the company
Founded in
22 Nov'76
Managing director
Paramasivan Srinivasan
- Afcons is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji Group, a leading conglomerate with over 150 years of expertise in the construction sector.
- Established as a partnership firm in 1959, Afcons boasts over six decades of experience in the infrastructure EPC sector. It has successfully completed numerous complex and extensive projects in India and internationally. Currently, it is managing multiple prestigious and large-scale projects, positioning it as one of the top global infrastructure enterprises from India.
STRENGTHS
- Consistent Financial Growth: Afcons has shown impressive growth, with its operational revenue, EBITDA, and net profit witnessing compound annual growth rates (CAGRs) of 10%, 22%, and 12% respectively, from FY22 to FY24.
- Healthy Return Ratios: Afcons’ financial performance is marked by healthy return metrics, with a Return on Equity (RoE) of 13.28% and a Return on Capital Employed (RoCE) of 20.18% in FY24, placing it among the industry leaders.
- Increasing Profitability: Over recent years, Afcons has consistently improved its EBITDA and Net Profit margins, which stood at 11.60% and 3.30%, respectively, as of March 31, 2024.
- Solid Order Book: As of June 30, 2024, Afcons boasted a substantial order book totaling Rs 31,747 crore, approximately 2.4 times its FY24 revenues, offering significant growth visibility for the medium term.
- Project Execution Excellence: In FY24, Afcons successfully completed 7 projects valued at Rs 8,843.11 crore, all on or ahead of schedule. Additionally, it was ranked as the 10th largest international marine and port facilities contractor in the 2023 ENR Top International Contractors rankings, marking it as the only Indian firm in the top 25.
RISK FACTORS
- Cash Flow Concerns: Afcons reported negative cash flows from operations during the quarter ending June 30, 2024. If this trend continues, it could undermine the firm’s operational efficiency and financial health.
- Project Dependence: A significant portion of Afcons' revenue is tied to government or government-owned projects, accounting for 69.80% of its total order book as of June 30, 2024. This dependency exposes the company to various project-related risks.
- Working Capital Needs: Afcons operates in a capital-intensive industry, requiring substantial working capital. As of June 30, 2024, its working capital needs stood at Rs 3,190 crore. Inadequate cash flows or inability to secure necessary financing could adversely impact its operations and financial health.
- High Trade Receivables: As of June 30, 2024, Afcons had trade receivables totalling Rs 3,975 crore. The delay or failure in collecting these receivables could negatively affect its business operations, financial condition, and cash flows.
- Pledge of Promoter Shares: Approximately 32.67 crore shares, almost the entire promoter holding and about 96% of the total outstanding equity shares pre-IPO, were pledged to lenders. For the IPO, these shares have been temporarily released from the pledge but will need to be re-pledged post-offer, after the SEBI-mandated lock-in period expires.
- Legal Risks: Afcons is involved in ongoing legal disputes related to its promoters, directors and subsidiaries. Unfavourable outcomes in these cases could harm the company's reputation and financial stability.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 5,430 crore
Fresh Issue
₹ 1,250 crore
OFS
₹ 4,180 crore
Price range
₹ 440 - 463
Lot size
32 shares
Issue Objective
Afcons intends to use the net proceeds from the fresh issue for the following purposes:
- Capital expenditure for acquiring construction equipment;
- Funding long-term working capital needs;
- Prepaying or repaying part of its outstanding borrowings and acceptances; and
- General corporate purposes.
Dates
Bidding open
25 Oct'24
Bidding close
29 Oct'24
Allotment date
30 Oct'24
Refund date
31 Oct'24
Listing
4 Nov'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.